Health Bill in House Relies on Wealth Tax

WASHINGTON – House Democrats plan to pay for their health-care legislation with a big tax increase on wealthy households, aiming to raise $540 billion over the next decade with a package of surtaxes on families making $350,000 or more.

The tax increase is the financial cornerstone of legislation that seeks to make good on President Barack Obama’s call to expand health-insurance coverage to tens of millions of uninsured Americans, while attempting to offset the cost and avoid expanding the federal budget deficit.

The House bill, expected to be formally unveiled as soon as Monday, is likely to cost $1 trillion overall. About half the cost of the bill will come from budget savings from ratcheting down payments that health-care providers receive through programs like Medicare, which covers the elderly. The balance will come from revenues generated by a graduated surtax that would begin in 2011, said New York Rep. Charles Rangel, chairman of the tax-writing House Ways and Means Committee.

Upper-income families currently face a top income-tax rate of 35%, though that is scheduled to rise to 39.6% in 2011. Under the Rangel plan, married couples making $350,000 would also be subject to a 1% surtax to cover the health plan. The levy would rise to 2% for those making above $500,000 and 3% for those with incomes of $1 million or more. Around 1% of U.S. households filing tax returns make more than $350,000, according to the Internal Revenue Service.

Congressional aides said the surtax rates would go higher as soon as 2013—to 2%, 3% and about 5% for each of the three levels. They added, though, that the higher rates might not kick in if other ways to pay for the health plan were found by then.

Mr. Rangel offered details of the financing plan Friday after emerging from a daylong caucus of Democrats on the Ways and Means panel. House Democrats aim to convene three key committees next week to formally consider the package. The legislation, which would create a public health-insurance plan that competes with private insurers, is expected to be brought before the full House by the end of the month.